Turkey, Brazil, Indonesia, and India should perhaps not be on your list if you’re thinking of exporting or expanding internationally, unless you can do so on secured payment terms. In this month’s Atradius Exporting Snapshot, Mark Hoppe discusses why these countries are currently high-risk exporting areas.


Australian businesses are jumping into exporting without fully understanding and researching the risks involved.

Atradius believes Turkey, Brazil, Indonesia, and India are currently viewed as being high-risk areas, followed by Russia, South Africa, and Mexico because of the current state of their economies.

Atradius recently published a report that discusses high-risk countries to be aware of. [1]

Here is a snapshot of high-risk countries and the risks to be aware of when exporting:


  • Extremely vulnerable to market changes but the country still has good access to capital markets.  This is changes in monetary policies of advanced economies, which can affect capital flows and the value of their currencies.
  • Heightened conflict in the region affects Turkish security. Turkey’s structural economic weaknesses are resurfacing, including, high inflation, large gross external financing needs, heavy reliance on volatile portfolio capital inflows and relatively weak international liquidity – coupled with increasing political risks.
  • The rise of corporate debt in Turkey significantly outpaced economic growth in 2015. As a result, the corporate debt-to-GDP ratio more than doubled to 59 per cent in the third quarter of 2015.
  • Although the level is still moderate, the debt structure is concerning. Over a third of this debt is financed externally.   It makes Turkish corporates more vulnerable to refinancing and exchange rate risk.
  • The share of foreign currency debt is even higher as Turkish corporations, particularly in the energy sector, have extensively borrowed foreign currency from local banks.
  • The most vulnerable sectors in Turkey are energy, construction materials, steel, transport (airlines), and chemicals.


  • Debt accumulation has outpaced economic growth over the past few years, first due to a relatively rapid increase in debt and most recently due to currency depreciation and the contracting economy.
  • Due to liquidity and insolvency, vulnerable sectors include: transportation, infrastructure, heavy equipment, and non-durable consumer goods industries, exposing these sectors to liquidity and solvency risk.
  • Small and medium-sized companies are the most vulnerable, particularly those operating in these sectors: consumer durables and electronics, agro-chemicals (particularly fertiliser producers), metal and steel producers, and the oil and gas sectors. Smaller-sized firms are at higher risk of insolvency with earnings mostly in local currency.  Smaller companies also tend to be higher leveraged.
  • Risks will arise out of the impeachment of ex-president Dilma Rouseff and the pending further deterioration of the labour market in the next quarter due to the  likely cutting of public sector jobs by the new President (Michel Temer). Private firms might also shed jobs in the face of a weak economic outlook. 


  • Corporate debt in Indonesia is still low at 24 per cent of GDP and overall corporate sector risks appear manageable.
  • Indonesian companies have relatively low buffers plus low commodity prices and currency depreciation have weakened their profitability and capacity to service debt.
  • Some businesses have been facing debt repayment problems in recent months, most notably on foreign currency bonds. Subject to exchange rate fluctuations, the foreign debt might overnight become unserviceable because the currency in that country has got measurably stronger.  Indonesia’s currency is one of the weakest in the world and is prone to devaluations
  •  The most vulnerable sectors in Indonesia are transport, and metals and steel sectors.


  • India is among the countries with a sharp increase in corporate external debt, which has more than doubled, albeit from a low base.
  • The debt ratios are still moderate: 50 per cent of GDP for total debt; and 58 per cent of exports of goods and services(XGS) for corporate external debt
  • However, net external debt of Indian companies is relatively high compared to other countries. Most of this debt is financed in foreign currency, predominantly US dollars. This means  Indian Companies will borrow in USD which they have to pay back in USD but they might trade their goods in Rupees so they have to buy their USD from the bank to finance their debts
  • The most vulnerable sectors in India: infrastructure (including power, telecommunications, and roads) and metals (including iron and steel).


  • Corporate debt increased at a significantly faster pace than Russian economic growth
  • In emerging markets, Russia hosts some of the most leveraged firms. The median debt-to-equity ratio for highly-leveraged Russian firms is 160 per cent
  • The most vulnerable sectors in Russia are companies operating in the construction and real estate sectors.
  • Companies operating in the commodity sector are generally not highly leveraged, and so may represent safer levels of risk.
  • The Russian central bank warns that, should the current situation in the commodity markets persist, coal, iron, and steel companies, and the mining sector might experience a rapid increase in their debt burden.

South Africa:

  • Vulnerable debt composition means the country’s debt exposes them to too much exchange rate risk. There can also be a mis-match between the debt repayment period and the timing of the revenue that is needed to service the debt
  • The share of external debt has doubled, which means the proportion of external debt  has doubled compared to the amount borrowed internally which means a devaluation of the Rand will be more devastating
  • The South African Rand is among the currencies hit hardest worldwide: it has depreciated by 40 per cent since May 2013
  • Declining profits are negatively affecting debt-servicing capacity.
  • The most vulnerable sectors in South Africa are mining, electricity, gas and water supply, and, to a lesser extent, transport and communications
  • South Africa’s social and political issues are becoming more pronounced. 


  • Vulnerable debt composition with strong resilience. This is the same as for South Africa but in Mexico’s case they are better able to cope with the negative effects
  • Three-quarters of the debt is financed externally, predominantly in foreign currency, which means  75 per cent  of debt is borrowed from institutions outside Mexico and ion currencies other than the Peso
  • Since the global financial crisis, the share of bond financing has significantly increased, to over two-thirds, which is among the highest in emerging market economies. Bond finance occurs when a borrower  issues a debt document acknowledging a fixed term loan while agreeing to pay interest (the coupon) by instalments and to repay the principal at a later date (maturity date).
  • Debt service is very low and debt-servicing capacity is strong for most companies, despite declining earnings and profitability due to the low oil price and exchange rate depreciation (by some 30% since May 2013). Debt service is the cash that is required for a particular period to cover the repayment of interest and the principal debt. Strong debt servicing is a  good ability to pay back
  • Large firms are generally more vulnerable than small firms, as they tend to be more leveraged and have weaker interest coverage. Particularly vulnerable are firms operating in energy (Pemex and CFE), chemicals, construction, and metals, especially steel, and companies in the supply chain of Pemex.  The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest on outstanding debt. So weaker interest coverage mean they struggle to pay.
  • The destabilising effect of the drug cartel activities as well as the further decline in oil prices, slower US growth, uncertainty about interest rates and currency volatility could affect the country’s performance in 2016. Crucial reforms have been passed, but their proper implementation remains to be seen.

Export companies can be exposed to the risks of non-payment for goods and services. Credit insurance can help exporters protect themselves from these risks but many don’t understand the competitive edge it can give them.

When dealing with customers overseas, especially in countries with fluctuating economies or civil unrest, the dangers of non-payment are real. This can lead to higher cash flow troubles for exporters, or even insolvency in serious cases.

Credit insurance lets exporters reduce their vulnerability when dealing with customers in overseas markets that may pose an economic risk. However, while it is common practice for exporters to maintain insurance for the loss or damage of goods, many still consider credit insurance a non-essential investment, so are missing out on the benefits it can provide.

Don’t be fooled by the advice of one person. It’s important to talk to many sources of advice, educate yourself, and make a reasoned, balanced decision about the best solution for your business.

[1] https://atradius.com.au/reports/a-closer-look-at-corporate-debt-in-emes.html